Follow These 4 Tips to Stop Freaking Out About Your Finances

Here's how you can still feel confident about your money situation even as your expenses go up.

By
Alexa von Tobel

Apr 3, 2017

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By the time you reach your quarter-life mark, you’ve probably hit the reset button at least once on almost everything: your job, your apartment, your relationships. It’s all exciting and liberating, but when the novelty starts to wear off, you realize that life can get stressful ... and expensive. You might, for example, need plane tickets to your best friend’s wedding, but you also have rent and bills to cover. Your computer is on its last legs but a laptop with halfway decent memory costs. And how are you supposed to look the part at work when your income doesn’t cover Fancy Clothes Money?

The problem is that during your mid-20s, just as you start to be and feel more solvent, these real-life scenarios begin to pile up. So even though women’s average income jumps 53 percent after age 25, according to LearnVest’s 2014 Financial Confidence study, your anxiety is also on the rise.

The solution? Take control where and when you can. Even if funds are tight, start small —like, really small — and build the money muscles that will allow you to get through both mini-crises and bigger complications. This can be as simple as checking your credit score, renegotiating your cell phone bill, or chatting with your girlfriends about money. LearnVest’s 2016 money habits and confessions study shows that 75 percent of Americans are more likely to meet a financial goal if they talk about it!

Owning your money life in your 20s — rather than having dollar worries control you — can change everything, from your career trajectory to the power balance in your relationships. Remember that it’s not always about how much dough you pull in. It’s also about having a plan in place that helps you make progress toward your goals each day. Use these tips to ride into your future like a rock star.

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1. Tackle Debt Head-On

Debt is a drag on your financial confidence; over time, it can even chip away at your emotional well-being. The good news: Assessing the full picture of what you owe and to whom and creating a plan can make it less overwhelming. First, tackle “bad debt,” or whatever loans carry the highest interest rates. For example, pay off credit cards before car loans, and if possible, pay more than your minimum balance each month. Also, stay on top of payments like doctor and utility bills. Those may not incur interest, but they can be sent to collections agencies if you ignore them, jeopardizing your credit.

2. Understand Your Benefits

When you are starting out and aren’t making that much money, your inclination might be to spend what you make ... until you realize you won’t be working forever and the more you save now, the better off you’ll be later. Even if it pinches, if your company offers a 401(k) plan, contribute at least the minimum amount needed to trigger the employer’s matching program (i.e., they’ll kick in funds too). Ask your HR department about flexible spending accounts (FSAs) and health savings accounts (HSAs), in which you can stash money (tax-free!) for health-care needs. Self-employed people and freelancers can also tap into tax-deferred benefits by setting up their own IRA via an online bank.

3. Ask for What You Deserve

As in a raise. It can be nerve-racking, but getting into the habit early in your career is crucial. Consider that a 5 percent raise on a $50,000 salary will put an extra $12,500 in your wallet over five years — you don’t want to miss out on that cash because of fear. Take this approach: Around the time of your annual review, ask for a meeting with your boss in which you can showcase your accomplishments. Say: “I’m very happy about the feedback you gave me on my last report,” then “I enjoy solving clients’ issues, like I did three times last month.” Let her know that you want to stretch yourself further, and include specifics related to the company’s priorities. More responsibility should come with a higher salary — not to mention big points for showing initiative.

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4. Splurge Responsibly

Learning to spend on wants without getting derailed can make having to shell out for needs less of a bummer. To decide if a bigger-ticket item is worth it — and not just a fleeting desire — I use the Cost Per Happy calculation. Before I make a purchase, I rate how much happiness it will bring me, on a scale from 1 to 10. If it scores a 6 or below, I skip it. If it’s a 7 or higher, I divide the cost of my splurge by the number of hours of joy it will bring me. Then I make my purchase with confidence.

Sade Adeyina

This article was originally published as "End Money Freak-Outs" in the April 2017 issue of Cosmopolitan. Click here to subscribe to the digital edition.

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